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Market Plus: Dec 05, 2003

posted on December 5, 2003


Market Plus: Dec 05, 2003

Pearson: Welcome to our Market to Market Web site and of course our Market Plus page, a little extra commentary from our analyst. This week very special, we have our senior market analyst, John Roach, with us. John, you were talking about this wheat market. Maybe after the action on Thursday we need to get more aggressive on making sales, huh?

 

Roach:I think so. The wheat market is a little different from the corn and the soybean market in that commodity funds carry a big stick in that market. When the commodity funds come in and buy ten thousand contracts of wheat, that makes a big difference in that market because it's much smaller than the corn market or the bean market. The other people that carry a big stick there are some of the foreign countries because they use boards to manage their marketing. And if you look down in Australia, which is now coming on stream with their new crop production, their wheat board is extremely capable and does a very, very good job of marketing. And I think it's not too much of a surprise to see wheat come up strong and then just get hammered here this week from those higher price levels. And the only people that really have the potential to do that, as I view it, is the Australian wheat board and I think we've reached the level they're willing to cap the market.

 

Pearson: Okay, so that saves the game. If you need to make sales near term...

 

Roach:Near term or long term on wheat. I would clean out the bin on old crop wheat and I'd be contracting new crop wheat and hoping that I get some other opportunities to contract new crop wheat at stronger price levels in the spring.

 

Pearson: Okay. Let's talk livestock, fed cattle market. Kind of some worrisome activity on futures this week and seeing a little bit of a crack in the cash. On the show you mentioned placements are up dramatically. What is ahead for fed cattle? Obviously trees don't grow in the sky, I mean, this thing wasn't going to stay at $1.00 fed cattle. What is ahead John?

 

Roach:We start to ratchet lower. And typically when that happens the ratcheting is a worse process than what people really anticipate it to be. The numbers are, will become more adequate for the demand as we move into the new year and they'll just continue to increase, our weights will start to come up and so I think we've nearly crested the mark. We've crested, I believe, I think we're on our way down and I'm concerned that people put high priced feeder cattle in the lot and have not put adequate protection on those cattle and could take some very serious losses this next year.

 

Pearson: To mitigate some of that, are there things we can do at this stage of the game?

 

Roach:Well, the put options look awfully expensive to most people but they still are a very good tool. If you have a very willing banker who will handle the margin situation there's sure nothing wrong with futures as well. Take a look at the P&L that you've got on the cattle, look at your break evens and be a business man here and make sure that you have a good profitable business this next year.

 

Pearson: At least while you're mitigating your losses.

 

Roach:Well, if you're into a situation where you have losses in here then you've been a little too optimistic out in the auction barn putting the feeder cattle in.

 

Pearson: Good point. John, thank you so much. John Roach, our senior market analyst with us this week, thanks John so much. That will wrap up our Market Plus portion here at our Market to Market web site. From all of us here on the program Market to Market, thanks for joining us.

 

 


Tags: agriculture commodity prices markets news wheat